Which one of the following Value-at-Risk measures would be most appropriate for a portfolio designed for a very risk-adverse investor?
A) Prob (Rp $\le$ - .20) = 100%
B) Prob (Rp $\le$ - .15) = 50%
C) Prob (Rp $\le$ - .10) = 25%
D) Prob (Rp $\le$ - .10) = 10%
E) Prob (Rp $\le$ - .05) = 1%

Question

Quizplus · Accepted Answer

A very risk-adverse investor would want a very low probability of experiencing large losses. The measure that would provide the highest level of protection in this case is Option E, which has a probability of only 1% of a loss of more than .05%. This means that the investor has a very high degree of confidence that the losses will not exceed .05%.

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